One of the most common problems the Court has faced since the creation of the Federal Circuit has been deciding what standard courts should use to assess the decisions of the Patent and Trademark Office (PTO) when it issues, or refuses to issue, a patent. So, the Court held in 1999 in Dickinson v. Zurko that Administrative Procedure Act review applies when a rejected applicant seeks direct review in the Federal Circuit. Last Term in Microsoft v. i4i, the Court reaffirmed long-standing rules that grant a strong presumption of validity when alleged infringers challenge patents in federal district court. On January 9, in Kappos v. Hyatt, the Court considers yet another such problem – the standard to be applied under Patent Act Section 145, a little-used provision that allows a rejected applicant to file a new action in federal district court challenging the PTO’s denial.

This case arose when the PTO’s Board of Patent Appeals and Interferences rejected numerous claims from respondent Gilbert Hyatt’s application, concluding that the specification section of the patent application did not adequately describe the subject matter of the rejected claims. Hyatt filed a lawsuit against the director of the PTO, under Section 145, seeking to introduce in a detailed declaration explaining precisely where the specification discussed each of the relevant claims. The district court refused to admit the declaration, finding that Hyatt was “negligent” for not submitting it to the Board or the PTO. A Federal Circuit panel affirmed, finding that Hyatt “willfully refused” to provide the material. But a sharply divided en banc court reversed, concluding that new evidence is generally admissible in an action under Section 145. In the shadow of Microsoft v. i4i, the Court granted the petition filed by the Solicitor General on behalf of PTO Director David Kappos.

The arguments of the parties are squarely drawn. Although the parties argue at length about the state of the law at the time when the various predecessors to Section 145 were adopted and amended (the statute dates to 1839), the central debate really pits the language of the statute against considerations of institutional design. The government emphasizes traditional principles of agency review, which limit the ability to rely in court on evidence not provided to the agency and impose a high standard for overturning expert agency decisions. The government emphasizes last Term’s Microsoft decision, which reaffirmed the oft-criticized rule requiring “clear and convincing” evidence to find a patent invalid, even when the case involves information not available to the PTO. To the government, this reflects a background principle that should be applied here largely because the statute does not directly reject it.

The government emphasizes the oddity it perceives in the system constructed by the Federal Circuit. A party that has evidence supporting patentability can strategically withhold the evidence from the PTO and present it to an apparently more favorable federal district court. Moreover, allowing de novo review in the district court undervalues the deference due to the agency and thus devalues the PTO’s examination process by encouraging applicants to sandbag the PTO and focus their patenting efforts on the courts.

Hyatt, on the other hand, emphasizes the unusual language of the statute, which requires the district court to make a determination “as the facts in the case may appear.” This is quite different from the more typical language in Section 144 (at issue in Zurko), which authorizes “review . . . on the record before the [PTO].” Hyatt forcefully argues that the distinction between the two sections justifies a different procedural approach, in which disappointed applicants readily can introduce new evidence.

Hyatt naturally argues that there is nothing particularly odd about the system of procedure he advocates. No sensible applicant would intentionally withhold favorable information from the PTO with a view to future litigation; surely seeking issuance in the first instance is the optimal strategy. Moreover, a contrary rule would motivate applicants to overwhelm examiners with repetitive documentation of every conceivable aspect of the specification and claims. For an indisputably overburdened PTO, such a rule would make little sense.

The biggest problem for both parties is that about the only thing that is clear about Section 145 is that district courts can admit some new evidence. So the federal government is hard-pressed to explain exactly what evidence it would tolerate. It rather feebly suggests that oral testimony would be admissible, but Hyatt forcefully contends that the right to introduce oral testimony is meaningless if the testimony is limited to oral declaration of the information already presented to the PTO. At the same time, Hyatt’s statutory argument really only proves what the government accepts – that admission of some new evidence is required. It does not obviously compel the wide-open system that Hyatt advocates.

In the end, then, the Court’s decision is likely to turn in large part on the Court’s perception of what makes sense of the statute as a matter of administrative design. Here, the particular facts of this case well might become important. On that score, although the district court and the panel criticized Hyatt for not providing the information to the Board or the PTO, he does an able job in his brief of suggesting that he tried to present the evidence as soon as possible. In particular, the final grounds of rejection appeared for the first time in the Board’s opinion that rejected Hyatt’s application. Hyatt submitted the relevant declaration in a motion for rehearing filed promptly after the Board’s opinion, but the Board refused to consider the document. If the Court perceives the Board’s action as high-handed (a fair, but not necessary, conclusion), it well might perceive sense in giving the district court a freer hand to consider new evidence.

Aug. 2015

In a conversation with Bill Kristol of The Weekly Standard, Justice Samuel Alito reflects upon (among other things) his arrival on the Court, recent First Amendment cases, the themes in his dissent in Obergefell v. Hodges, and his love for baseball.